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mestny [16]
3 years ago
5

You are considering purchasing a put option on a stock with a current price of $26. The exercise price is $28, and the price of

the corresponding call option is $2.65. According to the put-call parity theorem, if the risk-free rate of interest is 6% and there are 90 days until expiration, the value of the put should be ____________.
Business
2 answers:
Artyom0805 [142]3 years ago
6 0

Answer:

-22.42

Explanation:

Given,

Stock = $26, Call = $2.65, Exercise price = $28, Risk-free rate = 6%, Time = 0.24657 (90 / 365)

The put-call parity formula is $ C+Ke^{-rT} = P+S_0 $ where:

C = Call Price, K = Exercise Price, r = Risk-Free Rate, T = Time to Expiration,

P = Put Price, and $S_0$ = Stock Price

Subtracting $S_0$ from both sides, we get

$ P=C+Ke^{-rT} -S_0 $

$P= 2.65 + 28 e^{-(6)(0.24657)}-26 $

$P= 2.65 + 28 e^{-(1.47942)}-26 $

$P= 2.65 + (28) (0.033157)-26 $

    = -22.42

Goshia [24]3 years ago
4 0

Answer: $4.24

Explanation:

According to the Put-Call Parity, the value would be expressed by;

Put Price = Call price - Stock price + Exercise price *e^-(risk free rate *T)

T is 90 days out of 365 so = 90/365

= 2.65 - 26 + 28 * 2.71 ^ (-0.06 * 90/365)

= $4.24

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